TOWARDS A UNIFIED THEORY OF CAPITALIST DEVELOPMENT* Adolfo Figueroa Economics Department Catholic University of Peru Lima, April 2006
[email protected] Abstract. Since the 1950s, the capitalist world economy has shown significant empirical regularities, which can be characterized by the existence and persistence of (1) differences in income levels between the First World and the Third World, (2) differences in the degree of inequality between the First World and the Third World, (3) unemployment and underemployment across these group of countries. Standard economics has not been totally successful in explaining these facts. A possible reason for this failure is that standard economics assumes a homogeneous world capitalism in which countries differ only in quantitative aspects, such as factor endowments, saving rates, population growth rates, and technological diffusion rates. This paper presents a new theoretical approach in which three types of capitalist societies are assumed, each with different initial conditions in terms of factor endowments and the degree of inequality in the individual endowments of economic and social assets. Another critical assumption is that labor markets operate as non-Walrasian markets. The empirical predictions of the partial theories (for each type of society) and the corresponding unified theory of capitalism are then confronted against the observed empirical regularities. These facts appear to be consistent with the predictions of the theories.
I. Introduction The science of economics has remarkably developed in recent times. It has supplied societies with a significant core of knowledge. However, it has been unable to satisfy all the existing demand for knowledge. Many fundamental questions still remain unanswered, as will be pointed out below. Therefore, the supply of knowledge needs to be increased. This paper intends to be a contribution to that objective. Economics, as a factual science, needs to establish a set of fundamental factual regularities, which will then become the scientific puzzles to be explained. The empirical regularities about production and distribution in the capitalist world economy over the last five to six decades can be summarized as follows: First World: 1. The existence and persistence of unemployme